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Rating Action:

Moody's downgrades and places under review CompuCredit's amortizing credit card-backed notes

17 Feb 2010

Approximately $215 million of asset-backed securities affected

New York, February 17, 2010 -- Moody's Investors Service has downgraded the ratings on three classes of asset-backed notes issued by the CompuCredit Acquired Portfolio Business Trust ("APBT"). Additionally, Moody's has placed under review for downgrade four classes of notes issued by the APBT, and all five classes of rated notes issued from the CompuCredit Acquired Portfolio Voltage Master Business Trust ("Voltage MBT"). These notes are all backed by revolving pools of primarily sub-prime, unsecured, general purpose VISA credit card receivables.

RATIONALE

In June 2009, Moody's downgraded the notes from the APBT and the Voltage MBT citing marked collateral performance degradation and heightened concerns regarding CompuCredit Corporation's ("CompuCredit") funding and liquidity profile as the firm navigated a highly challenging environment for credit card lenders. Since then, collateral performance has deteriorated further than expected and the company's ability to renew one of its key funding sources remains in question.

Given the negative secular trend in collateral performance and credit conditions that remain constricted, CompuCredit's ability to obtain necessary funding to replace maturing securitization facilities is increasingly uncertain. In response, CompuCredit has curtailed growth in many areas of the business, including the closure of substantially all of its credit card accounts. For the APBT in particular, the closure of accounts has resulted in higher charge-off rates and lower principal payment rates than when these accounts remained open.

Additionally, in February, CompuCredit filed WARN notices with several state labor departments, indicating the company's intention to reduce headcount across its servicing and customer service call centers. We interpret these actions as a necessary response to continued erosion in cash flows from the company's core credit card business. CompuCredit is the servicer for both the APBT and Voltage MBT. Reductions in staffing or disruptions in operations may further compromise the ability of CompuCredit to collect outstanding receivables, potentially leading to higher charge-off rates and lower principal payment rates for both trusts.

Continued weakness in collateral payment rates and charge-off rates are unlikely to subside under the backdrop of a weak macroeconomic environment. Beyond these secular challenges, CompuCredit's weakened balance sheet strength and liquidity position increase the vulnerability of collateral performance to an interruption in servicing, or reduced efficacy of existing servicing operations. Moody's ratings action considers the unique structures of the rated notes, doubts and uncertainty surrounding CompuCredit's ability to fund and service their card programs, and the cumulative effects of performance degradation on the likelihood of complete principal and interest repayment to noteholders prior to their legal final maturity dates.

CompuCredit Acquired Portfolio Business Trust

For the APBT, the closure of accounts in early 2009 contributed substantially to the mid-year spike in the charge-off rate at nearly 40%. Charge-off rates have since subsided, but remain elevated at just above 20%. In addition to higher charge-offs, the trust's payment rate steadily declined throughout the year. As of December 2009, the APBT principal payment rate was 2.4%, approximately 33% below its year-ago level. The combination of account closures eliminating cardholder utility, and the macroeconomic environment of persistently high unemployment, reduces the likelihood of a reversal in these negative performance trends. The potential for discontinuity in servicing further amplifies the downside risks to collateral performance.

With the payment rate remaining weak, the current pro-rata allocation of available principal collections to the APBT Class A-1, A-2, A-3, and A-4 notes makes the complete return of principal to these Class A noteholders prior to their January 2014 legal final maturity date increasingly uncertain. The Class A noteholders' main sources of credit protection are the Class B subordinate notes and over-collateralization. As of December, the combination of these amounts totaled 58.5% of the notes outstanding plus the over-collateralization amount. If this percentage falls below 20%, the priority of principal payments among the Class A notes will switch from pro rata to sequential. Early amortization, therefore, would increase the likelihood that the senior Class A-1 notes would be fully repaid. Principal payments to Class B noteholders, however, are subordinated to the Class A noteholders and are therefore likely to sustain significant principal losses.

CompuCredit Acquired Portfolio Voltage Master Business Trust

The accounts in the Voltage MBT, for which CompuCredit is one of three equal partners, have not been closed, and continue to exhibit relatively stable purchase activity. Although the accounts in Voltage MBT remain open, charge-offs rose during 2009. During January, the charge-off rate reached an all-time high of 25.6%. Current delinquency rates also remain high, and under the backdrop of persistent unemployment are likely to remain at elevated levels throughout 2010.

The Voltage MBT principal payment rate has also been dropping. The January payment rate of 3.3% establishes a new all-time low point for this trust. Repayment of principal by the legal final maturity date becomes less likely if the payment rate continues to weaken, especially if it coincides with a weakening in the purchase rate, or rise in the charge-off rate. If the ongoing operation of the credit card program becomes unprofitable or unfeasible, the closure of cardholder accounts could ensue resulting in a further deleterious effect on both the charge-off rate and the payment rate of the trust. As with the APBT, CompuCredit acts as servicer on the Voltage MBT accounts, exposing the trust's collateral performance to the negative effects of potential servicing discontinuity.

The Voltage MBT trust has performance-based amortization features related to deterioration in the payment rate or net yield that in many negative performance scenarios will sequentially accelerate the return of principal to Class A noteholders. As a result of structural features unique to this trust, Class B noteholders are currently receiving an outsized portion of principal collections and could be repaid within the next two years ahead of the Class A notes. However, if the transaction breaches an amortization trigger, the Class B notes fall subordinate to all Class A noteholders, jeopardizing the ultimate return of principal to Class B noteholders before the legal final maturity date. Over the past year, the transaction's cushion above these performance-based triggers has eroded.

In its review of outstanding notes of both the APBT and the Voltage MBT, Moody's will assess CompuCredit's ability to address current and prospective pressures on its liquidity profile, the impact of downsized servicing operations on collections efficacy, the relative strength of each transaction's unique structural features, and the outlook for collateral performance in the context of the macroeconomic environment.

The complete rating actions are as follows:

RATINGS DOWNGRADED

Issuer: CompuCredit Acquired Portfolio Business Trust

(Amounts listed approximate issuance outstanding)

$14,137,000 Class A-1 Series 2004-One Asset Backed Notes, Downgraded to Ba2 from Baa3; previously on June 5, 2009 downgraded to Baa3 from Baa2

$6,463,000 Class A-2 Series 2004-One Asset Backed Notes, Downgraded to B1 from Ba3; previously on June 5, 2009 downgraded to Ba3 from Ba2

$8,252,000 Class B Series 2004-One Asset Backed Notes, Downgraded to Ca from Caa3; previously on February 19, 2009 downgraded to Caa3 from B2

UNDER REVIEW FOR POSSIBLE DOWNGRADE

Issuer: CompuCredit Acquired Portfolio Business Trust

(Amounts listed approximate issuance outstanding)

$14,137,000 Class A-1 Series 2004-One Asset Backed Notes, rated Ba2

$6,463,000 Class A-2 Series 2004-One Asset Backed Notes, rated B1

$3,732,000 Class A-3 Series 2004-One Asset Backed Notes, rated B2; previously on June 5, 2009 downgraded to B2 from B1

$3,352,000 Class A-4 Series 2004-One Asset Backed Notes, rated Caa1; previously on June 5, 2009 downgraded to Caa1 from B3

Issuer: CompuCredit Acquired Portfolio Voltage Master Business Trust

(Amounts listed approximate issuance outstanding)

$94,345,000 Class A-1 Series 2006-1 Asset Backed Notes, rated Ba1; previously on June 5, 2009 downgraded to Ba1 from Baa2

$22,410,000 Class A-2 Series 2006-1 Asset Backed Notes, rated Ba3; previously on June 5, 2009 downgraded to Ba3 from Ba2

$20,169,000 Class A-3 Series 2006-1 Asset Backed Notes, rated B3; previously on June 5, 2009 downgraded to B3 from B1

$38,096,000 Class A-4 Series 2006-1 Asset Backed Notes, rated Caa2; previously on June 5, 2009 downgraded to Caa2 from B3

$4,044,000 Class B Series 2006-1 Asset Backed Notes, rated Caa3; previously on February 19, 2009 downgraded to Caa3 from Ba2

METHODOLOGY

The principal methodology used in rating the transaction was "Moody's Approach To Rating Credit Card Receivables-Backed Securities", which can be found at www.moodys.com in the Rating Methodologies sub-directory under the Research & Ratings tab. Other methodologies and factors that may have been considered in the process of rating this issue can also be found in the Rating Methodologies sub-directory on Moody's website.

BACKGROUND

CompuCredit, is an originator and servicer of sub-prime credit card receivables. CompuCredit is a wholly-owned subsidiary of CompuCredit Holdings Corporation, headquartered in Atlanta, GA. In addition to credit cards, the company provides the under-served consumer credit market with a variety of other credit and related financial services products. As of September 30, 2009, CompuCredit Holdings Corporation had reported assets of approximately $729 million.

Additional research is available at www.Moodys.com. In addition, Moody's publishes a weekly summary of structured finance credit, ratings and methodologies, available to all registered users of our website, at www.moodys.com/SFQuickCheck.

New York
William Black
Senior Vice President
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

New York
Jeffrey Hibbs
Analyst
Structured Finance Group
Moody's Investors Service
JOURNALISTS: 212-553-0376
SUBSCRIBERS: 212-553-1653

Moody's downgrades and places under review CompuCredit's amortizing credit card-backed notes
No Related Data.
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